THE SUPREME COURT

THE SUPREME COURT; COURT OPENS WAY FOR DAMAGE SUITS OVER CIGARETTES

By LINDA GREENHOUSE,

Published: June 25, 1992

WASHINGTON, June 24—
The Supreme Court today opened the door wide to damage suits by smokers against the cigarette industry in a surprisingly broad decision rejecting many of the industry's arguments that such lawsuits were barred by Federal law.

The decision, in its most significant aspects, overturned rulings by a Federal appeals court in a case brought against three cigarette manufacturers by the family of Rose Cipollone, a Little Ferry, N. J., woman who died of lung cancer in 1984 after smoking for 42 years. The vote in most parts of the decision was 7 to 2.

The appeals court, the United States Court of Appeals for the Third Circuit, in Philadelphia, had ruled that smokers could not sue cigarette companies for injuries that stemmed from their smoking after Jan. 1, 1966. On that day, the first Federal law requiring warning labels on cigarette packages and advertising took effect. The appeals court found that the law, as well as a tougher law that Congress passed in 1969, served to pre-empt suits for damages "relating to smoking and health" that challenged the way cigarettes were advertised or promoted. Sorting Out Two Laws

In its decision today, the Court ruled that the first law, the Federal Cigarette Labeling and Advertising Act, did not pre-empt damage suits at all, because it did nothing more than bar states from setting their own requirements for the contents of cigarette labels.

The 1969 law, the Public Health Cigarette Smoking Act, was more broadly worded and did have some pre-emptive effects, the Court said today in an opinion by Justice John Paul Stevens.

But while the opinion did foreclose some legal claims by individual smokers, principally claims based on the theory that cigarette makers had a legal duty to go beyond the warning-label requirements and to issue more urgent warnings about the dangers of their products, the Court found no bar against suits based on legal theories that could prove particularly damaging to the industry.

Among the lawsuits that will now be permitted are those based on a theory that by concealing facts about smoking and health, or by actually lying about damaging information in their possession, the manufacturers breached a legal duty not to deceive. Also permitted will be lawsuits alleging a conspiracy among cigarette manufacturers to misrepresent or conceal the truth about smoking and health.

Justice Stevens said that in the 1969 law "Congress offered no sign that it wished to insulate cigarette manufacturers from longstanding rules governing fraud."

The decision apparently sent mixed signals to Wall Street, which had been watching the case with intense interest. Most tobacco stocks were off slightly for the day, although Philip Morris Companies closed up 5/8, at $73.75.

Industry spokesmen sought to minimize the scope of the decision, asserting it would neither lead to more lawsuits nor help plaintiffs win. Philip Morris called the decision "a significant victory" because "the court held that smokers can't sue cigarette companies claiming that after 1969 they weren't adequately warned of the risks of smoking."

Charles Wall, vice president and associate general counsel of Philip Morris, said the ruling that lawsuits could be brought charging the tobacco industry with fraudulently concealing the medical dangers of smoking was not a threat.

"The company did not engage in that kind of activity," Mr. Wall said. "I am not concerned about it."

But Matthew Myers, counsel for the American Heart Association and other healthy organizations, called that aspect of the ruling "the potential Achilles heel" of the tobacco industry. The industry was vulnerable, he said, if it had information on the negative effects of smoking and if the companies intentionally misled the public about that information, as plaintiffs have charged in some recent cases. Seeing a 'Major Victory'

Alan Morrison, litigation director for the Public Citizen group in Washington, said the ruling was "a major victory for the antismoking forces" in permitting suits to be brought for concealing medical information, the legal theory most likely to win a sympathetic hearing for jurors.

Most of the previous suits had been brought under the theory the court barred today: that cigarette companies should have provided more extensive warnings than required by the Federal law. Juries were largely unpersuaded by these "failure to warn" cases anyway. In the more than 300 cases filed since 1954, a plaintiff has yet to collect a cent from suing a tobacco company for health problems.

The Cipollone family's lawsuit, against the Liggett Group Inc., Philip Morris Companies Inc. and the Loews Corporation, the parent company of Lorillard, can now be revived in a new trial. In its 1990 ruling, the Third Circuit had also set aside a $400,000 judgment that the family won based on Mrs. Cipollone's smoking before 1966, ordering a new trial on that part of the case. The pre-1966 liability issue was not before the Supreme Court today.

The lawyer representing the Cipollone family, Marc Z. Edell, told The Associated Press today that at the new trial he would introduce evidence demonstrating that the cigarette companies conspired to mislead the public and falsely advertised.

Laurence H. Tribe, a Harvard law professor who argued the family's appeal in the Supreme Court in January, said today that he expected that the new trial would be successful. He said the majority today had analyzed the pre-emption question in a way that created a favorable climate for plaintiffs, not only in smoking cases but also in suits for damages from other products for which the Federal Government requires warning labels, like some kinds of food and alcohol products as well as items like children's pajamas. Three Factions on Court

Pre-emption is a complex legal area, and the Court's rulings, even within the current term, have not been particularly consistent. The fact that there was no single majority opinion for the most important aspects of the ruling today underscored the degree to which the Court is divided on the issue.

Justice Stevens wrote for a plurality of four Justices that also included Chief Justice William H. Rehnquist and Justices Byron R. White and Sandra Day O'Connor. This group controlled the outcome of the case by occupying the middle ground between two other groups of Justices. On one side, Justices Antonin Scalia and Clarence Thomas viewed the two Federal laws as pre-empting all aspects of the smokers' lawsuits. On the other side, Justices Harry A. Blackmun, Anthony M. Kennedy and David H. Souter found none of the claims to be pre-empted.

Consequently, when the Stevens four found that a particular claim was not pre-empted, there were seven votes to support that conclusion. When they found that a claim was barred, there were six votes for that holding.

The case, Cipollone v. Liggett Group Inc., No. 90-1038, was initially argued last October, before Justice Clarence Thomas joined the Court. After he took his seat, the Court ordered reargument in the case, giving rise to speculation that the Court was deadlocked 4 to 4, with the new Justice holding the balance. That was evidently not the case.

Federal courts have uniformly found pre-emption in smokers' lawsuits, but the cigarette industry was beginning to lose on the question in state courts. Despite having won before the Third Circuit, the industry urged the Supreme Court to hear the Cipollone appeal to resolve the matter.

Some of the claims the Court decided to permit today are among the most worrisome to the industry. For example, earlier this year, a Federal district judge in New Jersey, H. Lee Sarokin, issued a pretrial ruling ordering the industry to release a number of internal documents to the plaintiff in another case, a suit on behalf of a smoker who died in 1982.

In his ruling, Judge Sarokin said that his review of the documents indicated to him that "the tobacco industry may be the king of concealment and disinformation" and that the documents contained evidence of fraud. The industry said the judge had drawn unsupported inferences from the documents.

The legal question for the Court was the meaning of a pre-emption provision that Congress wrote into the 1969 law. The provision said that "no requirement or prohibition based on smoking and health shall be imposed under state law with respect to the advertising or promotion of any cigarettes the packages of which are labeled in conformity with the provisions of this act." When Pre-emption Applies

The question was whether a lawsuit alleging that a cigarette manufacturer had breached a legal duty under state law was in effect an effort to subject the manufacturer to a "requirement or prohibition" of the sort that the 1969 law did not allow.

In his plurality opinion, Justice Stevens said that there was no one answer to this question, and that each claim in the Cipollone lawsuit had to be examined separately to see if it sought to impose a "requirement or prohibition based on smoking and health."

The Court then found pre-emption for allegations that the industry had failed to include more warnings than required by Federal law in its advertisements, as well as for allegations that depictions of vigorous and attractive men and women in cigarette advertisements were a deceptive effort to "neutralize" the required warning labels. Both of these legal theories related directly to smoking and health, the subject of the Federal law, the Court said.

But Justice Stevens said that the other legal theories were based on general principles of state law, like the "duty not to conspire to commit fraud," and consequently could not be seen as state efforts to impose on the cigarette companies any special prohibitions based on smoking and health.

Photo: A 1942 advertisement for Chesterfield cigarettes. Rose Cipollone started smoking that year, and Chesterfields were her brand. (pg. B10)